Constant-Dollar Revenue Grows 10 Percent
WESTPORT, Conn., Nov. 12 /PRNewswire/ -- Cognizant Corporation (NYSE: CZT)
today reported that net income grew 21 percent to $77.1 million, and earnings
per share rose 27 percent to $0.47 per share for the quarter ended September
30, 1997. Adjusted for the change to equity accounting of Cognizant's Gartner
Group investment, reported revenue and operating income increased 9 percent
and 17 percent, respectively, in the third quarter of 1997. Constant-dollar
revenue for Cognizant in the 1997 third quarter grew 10 percent, compared with
the year-earlier period.
"Our core businesses delivered consistent, predictable earnings again this
quarter," said Robert E. Weissman, Cognizant Chairman and CEO. "We maintained
double-digit revenue growth, despite the divestiture of Pilot Software. We
now expect to exceed our 17-to-20 percent earnings per share growth target in
1997, based on strong business performance."
"We have sharpened the focus on our core businesses which are
well-positioned for growth," Weissman said. "Cognizant continues to
successfully monetize non-strategic assets and redeploy capital to maximize
shareholder value. Our decisions to discontinue purchase of Gartner Group
stock, divest Pilot Software, and realize gains on a portion of the Cognizant
Enterprises portfolio enabled us to accelerate our share buyback program and
fund additional investment in new products."
Net income of $77.1 million, or $0.47 per share, in the third quarter of
1997, includes an after-tax gain of $33.9 million from the sale of Cognizant
Enterprises investments, and a non-cash write-off of $29.9 million related to
the loss on the divesture of Pilot Software. Net income from continuing
operations (which excludes all one-time charges and gains) totaled
$74.3 million, or $0.45 per share, compared with $63.7 million, or $0.37 per
share, in the 1996 third quarter, an increase in earnings per share of
22 percent.
For the first nine months of 1997, revenues rose to $994.9 million, a
9 percent increase, and operating income grew 16 percent to $201.8 million.
Net income grew 22 percent to $190.0 million, or $1.14 per share, in the first
nine months of 1997, including after-tax net gains of $6.8 million, or
$0.04 per share, from dispositions. Net income from continuing operations in
the first nine months of 1997 totaled $183.2 million, or $1.10 per share,
representing earnings per share growth of 21 percent.
Share Repurchase Program
During the third quarter of 1997, Cognizant finished the purchase of
8.5 million shares, or five percent, of the company's outstanding stock. The
shares were purchased for a total of $299.7 million, or an average cost of
$35.22 per share.
"We completed an 8.5 million share repurchase originally planned for two
years in just seven months, and recently announced a second program to buy up
to 10 million shares," said Victoria R. Fash, Cognizant's executive vice
president and chief financial officer. "Cumulatively, these authorizations
amount to almost 11 percent of our initial capitalization, which clearly
demonstrates our commitment to enhance shareholder value."
The second stock repurchase plan, announced October 21, 1997, authorizes
purchase of an additional 10 million shares, or six percent, of the company's
outstanding stock. As of November 11, 1997, 574,600 shares at an average
price of $39.58 per share have been purchased under the second plan.
Constant-Dollar Results
On a constant-dollar basis, Cognizant revenue grew 10.3 percent in the
third quarter of 1997 and 11.0 percent in the first nine months, while
operating income grew 16.6 percent in the third quarter, and 17.6 percent for
the first nine months of 1997, compared with 1996.
Cognizant maintains a hedging program to protect a portion of committed
IMS revenues from the impact of currency fluctuations. For 1997, this program
protects operating income through the use of forward contracts. IMS's 1997
third quarter revenue grew 10.5 percent on a constant-dollar basis, compared
with reported revenue growth of 8.0 percent, while operating income grew
17.0 percent.
Operating Unit Results
IMS, the leading provider of global information solutions to the
pharmaceutical and healthcare industries, benefited from the strong
performance of its sales management products in North America, Japan and Latin
America, from excellent growth of its electronic territory management products
in the U.S., and from geographic expansion in Southeast Asia and Eastern
Europe. During the quarter, IMS's Xtrend prescription database service
broadened its customer base in the U.K., Germany, Belgium and the Netherlands.
Pharmatrend, which tracks over-the-counter pharmaceutical products, was
successfully launched in additional European countries.
Nielsen Media Research, the premier provider of electronic media
measurement services, achieved continuing growth from new metered markets,
additional cable networks, and its local Hispanic and Monitor Plus measurement
services. Revenue increased 12.6 percent and operating income grew
11.4 percent in the 1997 third quarter, compared with the year-earlier period.
Electronic measurement service was introduced in Nashville on July 10,
bringing the number of metered markets to 38 cities. Nielsen Media plans to
begin metered-market service in six additional cities during 1998, bringing
the total to 44 cities, representing 62 percent of the U.S. television market.
Reported revenue for Cognizant's Emerging Markets group, which includes
technology and information services businesses, declined 3.1 percent to
$17.9 million, due to the sale of Pilot Software. Revenue growth in the 1997
third quarter for current Emerging Markets operations (excluding Pilot) was
86 percent, and the group reported a profitable quarter. Erisco, a provider
of software-based administrative and analytical solutions to the healthcare
industry, continues to post strong performance from sales of its Facets(TM)
client/server system, which provides high-quality, cost-effective solutions to
managed-care organizations. Cognizant Technology Solutions, an outsourcer of
software applications and development services, is exceeding growth
expectations with additional contracts to provide year 2000 conversion
services. Cognizant Enterprises, the company's in-house venture capital
business, generated cash proceeds of $36.6 million and realized gains of
$33.9 million during the 1997 third quarter as the result of monetizing a
portion of its holdings.
The sale of Pilot Software during the third quarter of 1997 enabled
Cognizant to redeploy resources to strategic technology investments, including
an initiative to accelerate year 2000 compliance. The operating income impact
of year 2000 costs of $5.0 million is included in the Corporate and Other line
on the third quarter and first nine months income statements (Tables 1 and 2).
Accounting for Gartner Group Investment
In early 1997, Cognizant announced its decision to no longer actively
invest cash to maintain a majority ownership interest in Gartner Group. As
expected, Cognizant's ownership fell below 50 percent during the third quarter
of 1997. Beginning with the 1997 third-quarter results, Cognizant now
accounts for its ownership of Gartner Group as an equity investment, rather
than as a consolidated, majority-owned subsidiary, as required by generally
accepted accounting principles. An information packet containing pro forma
historical Cognizant financial statements with Gartner Group treated as an
equity investment was sent to investors in October, and is available upon
request.
Cognizant's financial statements for the third quarter of 1997 (Table 1)
and for the first nine months of 1997 (Table 2) reflect the change to equity
accounting, no longer including Gartner Group's contribution to revenue and
operating income. Income from Cognizant's Gartner Group investment is
reflected on the Gartner Equity Income line. Gartner Equity Income consists
of two components: Cognizant's share of Gartner Group's pre-tax income, and
unrealized gains from Cognizant's investment in Gartner Group. Cognizant's
share of the increase in Gartner Group shareholders' equity resulting from the
issuance of new Gartner Group stock during each quarter will be recorded as an
unrealized gain. For the third quarter and first nine months of 1997,
$0.7 million of unrealized gains is included in Gartner Equity Income.
Third-Quarter Balance Sheet Highlights
"Cognizant's high cash-generation capabilities are now apparent in our
financial statements as a result of the Gartner de-consolidation," said Fash.
"Cash flow is running well ahead of our original projections. We are revising
upward our estimate of 1997 free cash flow, from $130 million to the
$175-to-$185 million range," concluded Fash.
Cash and Cash Equivalents on Cognizant's Summary Balance Sheet (Table 3)
indicates a cash balance of $283.2 million at September 30, 1997, compared
with $304.8 million (excluding Gartner) at December 31, 1996. The cash
balance change reflects the impact of share repurchases, largely offset by
cash flow generated by Cognizant operations and by proceeds from Cognizant
Enterprises dispositions.
At September 30, 1997, shares outstanding totaled 162.2 million.
Cognizant Corporation integrates information and technology to create
business insight. Its principal operating units are IMS, which offers global
information solutions to the pharmaceutical and healthcare industries, and
Nielsen Media Research, the leader in audience measurement for electronic
media. Cognizant also is the largest shareholder of Gartner Group, the
premier provider of research and advisory services to the information
technology industry.
November 12, 1997
This press release includes statements which may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although Cognizant believes
the expectations contained in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to be correct.
This information may involve risk and uncertainties that could cause actual
results to differ materially from the forward-looking statements. Factors
which could cause or contribute to such differences include, but are not
limited to, factors detailed in the company's Securities and Exchange
Commission filings.
Table 1
Cognizant Corporation Income Statement(a)
Three Months Ended September 30
(Unaudited, in millions except per share)
1997 1996(b) % Change Constant
$ Growth
Revenue
IMS $ 233.2 $ 215.9 8% 11%
Nielsen Media Research 89.9 79.8 13 13
Emerging Markets 17.9 18.5 (3) (2)
Total Revenue 341.0 314.2 9 10
Operating Income
IMS 68.3 58.4 17 17
Nielsen Media Research 28.6 25.7 11 11
Emerging Markets 2.2 (4.2) -- --
Corporate and Other (11.9)(c) (5.1) (133) (133)
Total Operating Income 87.2 74.8 17 17
Interest Income 3.1 3.2 (4)
Gartner Equity Income 14.5 11.6 25
Gains from Dispositions, Net 4.0 -- --
Other Expense (0.3) (0.9) 76
Income Before Provision for
Income Taxes 108.5 88.7 22
Provision for Income Taxes (31.4) (25.0) (25)
Net Income $ 77.1 $ 63.7 21%
Earnings Per Share $ 0.47 $ 0.37 27%
Average Shares Outstanding 163.1 170.1 (4)
(a) Reflects Cognizant's Gartner Group ownership under equity accounting,
as if in effect since January 1, 1996.
(b) 1996 results are continuing operations, defined as operating results
for Cognizant businesses on an on-going basis, which excludes all
discontinued operations, pre-spin one-time charges and gains, and
non-recurring items.
(c) Includes impact of year 2000 costs.
Table 2
Cognizant Corporation Income Statement(a)
Nine Months Ended September 30
(Unaudited, in millions except per share)
1997 1996(b) % Change Constant
$ Growth
Revenue
IMS $ 672.4 $ 619.3 9% 11%
Nielsen Media Research 263.4 234.8 12 12
Emerging Markets 59.1 56.8 4 6
Total Revenue 994.9 910.9 9 11
Operating Income
IMS 162.0 140.3 15 17
Nielsen Media Research 82.3 73.9 11 11
Emerging Markets (16.5) (13.8) (19) (19)
Corporate and Other (26.0)(c) (26.8) 3 3
Total Operating Income 201.8 173.6 16 18
Interest Income 7.8 4.7 67
Gartner Equity Income 45.1 33.1 36
Gains from Dispositions, Net 9.4 -- --
Other Income (Expense) (2.4) 2.7 --
Income Before Provision for
Income Taxes 261.7 214.1 22
Provision for Income Taxes (71.7) (58.9) (22)
Net Income $ 190.0 $ 155.2 22%
Earnings Per Share $ 1.14 $ 0.91 25%
Average Shares Outstanding 166.1 169.9 (2)
(a) Reflects Cognizant's Gartner Group ownership under equity accounting,
as if in effect since January 1, 1996.
(b) 1996 results are continuing operations, defined as operating results
for Cognizant businesses on an on-going basis, which excludes all
discontinued operations, pre-spin one-time charges and gains, and
non-recurring items.
(c) Includes impact of year 2000 costs.
Table 3
Cognizant Corporation Summary Balance Sheet(a)
(Unaudited, dollars in millions)
September 30, December 31,
1997 1996
Assets
Current Assets
Cash and Cash Equivalents $ 283.2 $ 304.8
Accounts Receivable, Net 280.8 307.9
Other Current Assets 56.9 56.9
Total Current Assets 620.9 669.6
Gartner Equity Investment 170.2 135.5
Notes Receivable and Other Investments 96.5 114.3
Property, Plant and Equipment, Net 226.2 236.0
Computer Software 127.9 138.2
Goodwill 88.3 117.2
Other Assets, Net 107.1 100.9
TOTAL ASSETS $1,437.1 $1,511.7
Liabilities and Shareholders' Equity
Current Liabilities $ 433.7 $ 396.3
Minority Interests 101.7 0.9
Other Liabilities 196.0 241.9
TOTAL LIABILITIES 731.4 639.1
Total Shareholders' Equity 705.7 872.6
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,437.1 $1,511.7
(a) Reflects Cognizant's Gartner Group ownership under equity accounting,
as if in effect since January 1, 1996.
SOURCE Cognizant Corporation
 back to top
CONTACT:
Joseph C. Allen of Cognizant Corporation,
203-222-4235
|
